Auto Stocks Jump Nearly 6% on Govt's Push for Consumption and EV Expansion

Despite facing a slowdown in overall demand and industry-wide challenges, the Union Budget has delivered a substantial uplift to India's automotive sector. The Nifty Auto Index surged nearly 2% following the announcement of Budget 2025 by Finance Minister Nirmala Sitharaman.

Domestic automobile giants including Maruti Suzuki surged nearly 6%, TVS Motor jumped 5%, Bajaj Auto 2.7%, Exide Industries 2.43%, Hero MotoCorp 2.4% and Mahindra and Mahindra jumped 2.11%.

Sagar Shetty, research analyst at Stoxbox says that with a favourable tax structure, the demand sentiment likely to improve especially for entry-level cars.

“On the EV front, with the Finance Minister’s announcement of exemptions from basic customs duty (BCD) for 35 additional capital goods for EV battery manufacturing, the space is poised to witness increased adoption driven by reduced production costs, the impact of which would be brushed off on the end price of the product,” he said.

In addition, the government has removed the BCD on essential materials like cobalt, lithium-ion battery scrap, lead, zinc, and 12 other critical minerals, which are key for the manufacturing of batteries, semiconductors, and renewable energy equipment.

According to Shetty, this move promotes higher levels of localization among manufacturers, safeguards India's emerging EV market, and creates a conducive production environment. These initiatives, coupled with PM e-Drive and a strong focus on the "Make in India, Make for the World" vision, the sector is now better shielded against the challenge of cheap imports.

“We believe Exide Industries Ltd and Amara Raja Energy & Mobility Ltd would likely be the key beneficiary given their position in the EV battery space,” he added.

Saji John, Senior research analyst, Geojit Financial Services says the broad scale custom duty exemption on entire EV ecosystem and support for local production will enhance competitiveness and affordability.

“Additionally a stronger rural economy and higher disposable income should boost demand for entry two wheelers and cars. We remain postive on hero motorcorp, TVS motor, Exide industries and UNO Minda,” he added.

In addition, the auto sales data for January 2025 also boosted the optimism for the auto stocks. Maruti Suzuki reported a record sales of 2,12,251 units, which is its highest ever monthly sales volumes. Hyundai India recorded total monthly sales of 65,603 units in January 2025, comprising domestic sales of 54,003 units and export sales of 11,600 units. MG Motors reported sales of 4,455 units in January 2025, registering a massive 256% YoY growth.

Mahindra, a key player in the far equipment sector, has seen double-digit growth in January 2025 sales. However, Tata Motors recorded a sales decline of 10% YoY in the domestic market. The company sold 48,076 units last month as compared to 53,633 units sold in January 2024.